Aereo tells court it’s “bleeding to death.”

In an emergency motion (PDF) filed Friday, TV-over-Internet startup Aereo submitted its most detailed legal arguments yet as to why it should be allowed to be a cable company. It also asked, based on those arguments, to resume operations until a final decision was reached.

US District Judge Alison Nathan wasn't having it, though. She rejected (PDF) the emergency motion and ordered it stricken from the record the same day it was filed. "Defendant has jumped the gun in filing, without authorization, its motion," she wrote. Instead, she ordered both sides to file papers in support of their positions following the Supreme Court case over the next five weeks.

Aereo was shut down a few days after it lost its Supreme Court case on a 6-3 vote. The Supreme Court said Aereo's strategy of using tiny antennas to push over-the-air TV over the Internet looked too much like a cable company to avoid paying copyright royalties.

Now Aereo is running with that ruling, arguing it should be allowed to pay the same retransmission rate that cable companies pay by law, which is around one percent of revenue. That strategy has already failed once, when a company called ivi TV tried it a few years back. The Copyright Office has refused to license Aereo as a cable company until a court rules otherwise.

Back to oral arguments

In the emergency motion, Aereo argues that looking at the Supreme Court's ruling, as well as justices' statements during oral arguments, shows clearly that its "Watch Now" system should be qualified as a "cable system" under the Copyright Act.

The motion also shows Aereo has another argument it intends to use to stay alive—that its recorded shows weren't banned by its Supreme Court loss at all. Since the US Court of Appeals for the 2nd Circuit ruled that operating a DVR in the cloud is legal in the watershed Cablevision case, Aereo seems to be preparing for an argument that, if limited to recorded shows only, it would be in the clear.

"The Supreme Court's decision recognizes that Aereo's time-shifted 'Record' function does not violate Plaintiffs' public performance rights, but uncoupling that functionality from Aereo's 'Watch Now' function requires technological development that will take some time," write Aereo's lawyers. "In the interim, Aereo is currently incurring staggering costs without accruing any revenue. The company is figuratively bleeding to death."

The TV broadcasters "made clear their plan to allow that bleeding to continue," they add.

That "runs counter to the Supreme Court's intent," which Aereo lawyers argue wasn't to shut down the company, but rather to make it pay the statutory license rate.

However, there's nothing in the Supreme Court opinion saying Aereo should be entitled to the compulsory license that cable companies get. Instead, Aereo relies in part on quoting the justices during oral arguments. The emergency motion quotes this exchange between Justice Sonia Sotomayor, who voted with the majority against Aereo, and Paul Clement, the lawyer representing the TV broadcasters:

JUSTICE SOTOMAYOR: . . . But I look at the definition of a cable company, and it seems to fit.

* * *

. . . Makes secondary transmissions by wires, cables, or other communication channels. It seems to me that a little antenna with a dime fits that definition. To subscribing members of the public who pay for such service. I mean, I read it and I say, why aren't they a cable company?

MR. CLEMENT: Well, Justice Sotomayor, a couple of things. First of all, I mean, I think if you're—if you're already at that point, you've probably understood that just like a cable company, they're public—they're publicly performing and maybe they qualify as a cable company and maybe they could qualify for the compulsory license that's available to cable companies under Section 111 of the statute.

JUSTICE SOTOMAYOR: But it just gets it mixed up. Do we have to go to all of those other questions if we find that they're a cable company? We say they're a cable company, they get the compulsory license.

Aereo's motion also explains it meets other parts of the legal definition of a cable company: it has a facility, it receives signals, and transmits those signals to paying subscribers.

Deafening silence

It's not at all clear this argument will succeed with judges. One judge has already suggested, in the FilmOn contempt order, she doesn't see it this way.

In other court cases, broadcasters have argued that their copyrights are infringed by TV-over-Internet broadcasts, even when the distributor does have a paid-up compulsory license. That's why legal battles over the Dish Hopper and related services continue.

Aereo seems unlikely to succeed in these arguments, seeing as how it's faced with an official slapdown from the nation's highest court. But the fact that it's able to raise multiple unanswered questions about what the justices intended shows just how narrow, and ultimately not useful, the ABC v. Aereo opinion is.

Essentially this is what the opinion boils down to: Aereo looks like a cable company, and they don't pay—that's illegal. But what if Aereo does pay? And what if they ditched live programming and stuck to only recorded shows? Surely consumers could use their own antenna, combined with cloud storage, under the Cablevision precedent. So how close can Aereo get to that?

Lower courts are likely to hear loud and clear the message that Aereo should be viewed as some type of bad actor. (They sure got that message in the Grokster case, and courts have seen peer-to-peer of all kinds as a tainted technology ever since.) There's really no other message to get from the poorly thought out "Aereo looks like cable" rule that the majority wrote.

As a result, we're left with no roadmap for how to use technology around video content in a way that's both useful and legal, without striking a deal with the dominant content companies. The Supreme Court had its best chance yet to give some kind of a roadmap, and it didn't do so. If Aereo can tweak its service and survive, the opinion should have said so. If Aereo can't adapt to survive, the opinion should have said that—this line of argument was foreseeable. The silence on key issues is deafening, and a loss for all parties: Aereo, the TV companies, and, of course, the public.